Treasury mulls higher taxes for off-road vehicles

Five-year plan will to reduce VAT on fuel-efficient cars.

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The Finance Ministry, in a bid to improve the environment, has drawn up a five-year plan to levy higher taxes on environmentally harmful vehicles.
The plan is due to be presented to Finance Minister Avraham Hirchson and the Knesset after Pessah, said Israel Tax Authority deputy director-general Boaz Sofer, adding that 4X4 off-road vehicles are likely to be taxed at a higher rate than regular cars, as they create more pollution.
"In the past few years, we have examined several options regarding...ongoing pollution, and the question that was emerged was how to decide what is 'greener.' We are in the process of creating a five-year plan for a new general policy based on [vehicles'] effects on the environment," Sofer said Monday at a seminar on economics and the environment co-sponsored by the Beracha Fund, the Israel Union for Environmental Defense, and the Environment Ministry.
"We keep coming across cynicism, especially from government offices, when it comes to promoting green policies, but we have enough means to implement our policy through [taxes], license fees, depreciation, and employer incentives," Sofer said.
He added that the Treasury's goal was to teach investors, manufacturers and government offices about different vehicles' effect on the environment. However, Sofer said, in order to influence consumer behavior, he had to make the cars that produce less pollution attractive.
"Off-road vehicles pollute more than regular cars, and much more than the "green" cars, so they will be taxed at a higher rate," Sofer said. He added that his office was also considering the British system of 'green taxation,' which taxes environmentally-friendly cars less than other models.
"I believe this plan will create a new [environmental] agenda once it is before the Knesset, and results will follow," Sofer declared.
Ofer Nir-Kedmi, head of the Environment Ministry's economics department, supported Sofer's position. "We prefer to give direct incentives rather than create another distortion like differential VAT. The right way to promote friendly energy will be examined in light of the demands of the Israeli market."

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